This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

HomeAway IPO a Solid Choice

NEW YORK ( TheStreet) -- HomeAway is a vacation travel site with a huge member base on multiple continents. Unlike most IPOs it has profits as well. HomeAway (which plans to trade under the symbol AWAY) controlled expenses, sought out key acquisitions and is focused on profits from travel-related services like insurance for property damage, credit card processing and travel insurance, adding those to the main revenue generator, the annual subscription fees from members.

If you look at most recent IPOs, although there have been a few standouts, most have ended up trading below their initial offering prices within weeks of having gone public. Even the much-heralded Yoku.com (YOKU) recently traded almost all the way back to its IPO price after having almost tripled that value in the first six months. It has been that kind of market of late.

So how do I believe that HomeAway will do post-IPO? Actually, given the revenue streams and good growth rates, I would expect a pretty good reception. Expectations aside though, I would let the stock settle before trying to buy it if the price trades higher than the IPO. If weaker, I would target a 10% to 20% discount as an entry price range. If the general market struggles over the next couple months, that may become possible. At that type of a discount you can make the case for the buy.

Barring such a discount, I would instead wait for a good month or two of trades to let the chart build out. By waiting, a good entry spot can be ascertained -- an entry point where the potential reward is more than the risk of entry. As a technician, I like to see where the anchor bars form so that I know where likely buyers are probably lurking. For an IPO, the first few days or even weeks, the IPO price is where support should be found. If it falls under and closes lower than the IPO price, then the pressure builds to push it lower. That's the reasoning for a 10% to 20% discount being needed to buy before the chart builds out.

Although an IPO will trade independent of the market initially, a weak market will pull and IPO lower eventually. Because this market has been weak, there is no reason to believe that on a short-term basis that has changed. Thus, if you are buying an IPO in this current market environment you need to err on the side of patience and lower prices.

At the time of publication, Little held no positions in any stock mentioned, though positions can change at any time.

L.A. Little, author, professional trader and money manager, writes daily on his own educational Web site for traders and investors. He has been featured in numerous publications and is the author of Trade Like the Little Guy. His new book, Trend Qualification and Trading, details the principles and techniques he writes about on TheStreet. Little�s background includes degrees in philosophy, computer science, computer information systems and telecommunications. With a trading philosophy centered on capital protection first and the accumulation of consistent gains over time, Little espouses a simple technical approach to trading the markets that is a throwback to the days of past. With a focus on swing points and trend qualification, he provides a breath of fresh air to an otherwise crowded room of derivative indicators with an emphasis on technical minutiae.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,827.75 +12.81 0.07%
S&P 500 2,072.83 +5.80 0.28%
NASDAQ 4,787.3170 +29.0650 0.61%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs